Bank of America anticipates that the Bank of England will raise interest rates by 25 basis points on Thursday, with a 7-2 vote split among policymakers. The move is expected to kick off a short, gradual hiking cycle, according to the bank, which also foresees a bias toward further rate increases.
The guidance suggests limited and gradual tightening ahead. Bank of America predicts a second rate hike in February 2027. The bank views current market pricing for future rate increases as excessive and expects a bull flattening in the yield curve during the Monetary Policy Committee meeting based on dovish hiking signals.
Bank of America notes that currency markets will be influenced by economic data and energy prices, despite asymmetry from back-to-back pricing.